What does the portfolio value of a "buy and hold strategy" consist of?

A "buy and hold strategy" is an investment approach where an investor purchases shares or other securities and holds them for a long time, regardless of market fluctuations. The essence of such a strategy is to benefit from the long-term appreciation of assets, particularly equities.

In this context, the portfolio value of a buy and hold strategy encapsulates the value of all investments within it, typically including both stocks (equities) and cash or cash equivalents (such as a risk-free asset). Option B states that the portfolio consists of the value of the risk-free asset plus stocks, which accurately reflects that many investors will hold some liquidity for rebalancing, opportunities, or other investment needs.

This comprehensive view is critical in portfolio management, especially when assessing risk, returns, and the overall asset allocation strategy. While options referring solely to cash reserves, investments in bonds and stocks, or only equity investments provide limited scopes, they miss the full picture of a typical buy and hold approach, which usually involves a blend of various asset classes, including equities and a measure of cash or cash-equivalents.